[EN] The Secret to Successful Customer Onboarding

Customer onboarding has come up a lot lately, which is great since having a poor onboarding experience for your customers can pretty much kill your growth… if not your business.

The first in-app experience your customer has with your product sets the tone for your relationship, and if it’s confusing, overwhelming, or otherwise puts up barriers to achieving success (or at least recognizing the value potential in your product), you’re in trouble.

As I say all the time, the seeds of churn are planted early, and those seeds are planted deep if your onboarding experience for new customers or your prospects during a free trial is terrible.

Every time I talk to a low-touch, self-service SaaS company experiencing massive drop-off immediately after sign-up, low Free Trial-to-Paid conversion rates, few customers staying past 90 days post-conversion, etc. it is always an onboarding issue.

When I talk to Enterprise, high-touch SaaS companies that experience a lot of churn or non-renewals, aside from misleading sales practices, the main culprit is the customer onboarding process. Whether the Time to First Value is too long, the experience is painful, or expectations are simply mismanaged, those “seeds of churn” can be traced back to onboarding.

Regardless of whether it’s a high-touch or low-touch scenario, 100% of the time, the problem is that the SaaS vendor either doesn’t know what success is for the customer or prospect… or forgot that solving for that was the most important thing.

What defines an ‘Onboarded’ Customer?

Most people think in terms of “functional” or technical onboarding; getting their customers and users to go through the motions to get “up-and-running” with their product rather than equating onboarding with a value delivery milestone.

But even if they focused on value delivery, there’s still no universal definition of a customer that is fully onboard; it’s simply different for every company.

And for SaaS vendors – where customers can start small and expand their use of the product (ideally) over time – the notion of “onboarded” as a status is even harder to nail down than it was with traditional Enterprise software.

So, since it’s hard to nail it down and there’s no universal definition for it, I prefer to consider a customer “onboarded” once they’ve achieved “initial success” with your product (consider this First Value Delivered – FVD).

What “initial success” does my customer need to achieve when all parties understand that the breadth and depth of use will continue to evolve and expand over their lifetime as a customer? That’s a great question to keep top of mind as you go through this process, actually.

When I talk to someone about optimizing their SaaS Free Trial for more conversions, as an example, I ask them what a successful Free Trial looks like for their prospect. And no… it’s not “they convert to a paying customer.”

That’s YOUR definition of success; don’t confuse that with THEIR definition of success.

Situational Success: Trial, Proof of Concept, and Early Lifecycle

While we’re solving for their initial success – not ours – you’ll find in a Free Trial, for example, that initial success for your customer is actually the point where becoming a paying customer is the next most logical step. So you’ll get that “they convert to a paying customer” outcome you want, by focusing on the outcome they want. Winner-Winner.

They’ve realized value – or they’ve seen the value potential in the product – and they’re technically ready to convert.

That could happen on day 2 of a 30-day free trial, but most companies will let them go the full 30-days (or even longer) before they try to get them to convert.

Imagine if you asked for the sale after they achieved “success” … if that happens on day 3, you could convert a customer on day 3 of a 30 day trial, instead of waiting until the trial is over.

This is also why you should tie your customer or prospect communication (in-app messages, emails, phone calls, etc.) to their progress – or lack thereof – through those success milestones instead of saying you’ll just send something on Day 1, 5, 7, and 32.

Since everyone achieves success on their own cadence, having a timed autoresponder sequence, when the technology is readily available to trigger based on milestones reached, is irresponsible today.

Okay, that makes sense… but how do you create a plan, customer journey map, etc. that will guide the customer to achieve “success” in the first place?

You create a plan to get here by identifying “initial success” and backing out from that goal while identifying success milestones along the way.

Not Sure How they Define Success? Ask.

Whenever I layout that plan for creating the success milestones, though, I always get people saying they don’t even know what success looks like for their customers in the first place. How do you figure that out?

Honestly, that was a great question to ask BEFORE you built your product, probably… but at least you’re asking it.

The easiest way to figure out what success looks like for your customer – before you can break that down into milestones – is to ask them.

How do they measure success themselves?
How are they measured by their boss?
What are they trying to achieve with your product?

I’d ask them what “success” means to them first, do that with several from a similar cohort (if you have multiple types of customers across various use cases – as you often find in very horizontal products – you may want to pick an ideal customer to focus on initially), analyze that for similarities and patterns, reduce it down to a handful of absolute required outcomes, and then turn it back to them for approval/buy-in.

But to be absolutely clear, you’re just getting them to tell you the outcomes they desire, and maybe the milestones needed to get to that “success” with your product.

You’re not asking them what they need or want (features, functionality, or even workflows) since they’ll generally just tell you what they’ve done with existing products or what they wish they could have done, which if you build end up simply being iterations on existing ways of doing things.

You can make big leaps forward by understanding not what they need to “do” but what they need/want to achieve and using your creativity/engineering prowess/entrepreneurial spirit to solve for that.

Iterating on existing processes isn’t fun or really the lucrative in the long run.

A Thought Experiment: The Online Store Builder

Let’s say you have an e-commerce store builder, what does initial success look like for your customer?

The first time they sell an item? Sure… we’ll go with that.

What are the things the need to do to achieve success?
Customer-Centric Success Milestones (from last to first):

Success Milestones from the Customer POV

Make their First Sale! <== success (at least at first)
Get customers?
Open for Business
Get feedback on the design
Stock the virtual shelves
Figure out how to get paid
Make the store their own
Create the Store
Decide to open an online store <== the required step 0

To the right is what it would look like if mapped out in Trello (you can get access to the actual Trello board here).

Whether that is the right set of success milestones for an e-commerce store builder isn’t the point, but I got there by saying “what would success look like for my customer?” and backing out from there to meet them where they are at first.

Like I said earlier, don’t guess about what “success” is for your customers. If you don’t know, ask them.

In the early days, this is where Customer Development work really pays off. But, if you’re in-market and looking to optimize, this is where leveraging the expertise, experience, and knowledge of your Customer Success Management system (or your Customer Success Managers) and/or continually doing new Customer Development really comes into play.

Just Focus on the Next Success Milestone

The cool part of breaking down the onboarding process like this is that while you must keep the overall goal of success in mind, you only have to solve for the next success milestone with your lifecycle messaging, app design, etc.

Once they reach that milestone, onto the next one and so on. This makes creating those email or in-app lifecycle messages easier and results in them being much more effective.

Oh, and keeping this “success milestone” way of thinking after they become a customer – or are otherwise past the customer onboarding process – will allow you to surface upsell/cross-sell offers, as well as advocacy requests, at the perfect time so you’re more likely to get a positive result.

BTW, this way of onboarding customers is exactly how I helped one SaaS company take their average conversion time on a 30-day Free Trial from 42 days (yes, an average of 12 days post-expiration for conversion to paying customers) to… 3 days. Yes, you read that right. Average conversion time went fro 42 days to just 3 days.

Oh, and through the use of creative discounts we also drove their Average Subscription Value (ASV) up by 33%. Awesome!

Active Users are a Vanity Metric

How can this happen? Your customer was very active, logging-in several times in the last month.

I think it’s fair to say that if Active customers churn, then “active” – as a customer “state” – clearly doesn’t equate to success.

So if it doesn’t mean your customer is successful, what exactly does “active” mean?

Let’s explore this a bit further…

The State of Your Customer is NEVER Binary

In my experience, “Active” is usually a vanity metric. We feel good when our users are “active.”

We can tout metrics like Daily or Monthly Active Users (DAU / MAU)… it’s fantastic, as long as “active” means something.

“Inactive” on the other hand is an opposite-of-vanity metric; we panic when they flip from active to inactive.

But neither of those “user states” – active or inactive – actually mean anything on their own, without additional context.

“Active” is a made-up “metric” that may or may not equate to the customer achieving success, realizing value, or doing anything that actually matters to them.

Quite often – at least in SaaS – “active” is unfortunately tied to in-app activity with one of the key inputs being “logins.”

Inactive is more telling, right? The user stops “using” and they stop getting value. Unless the email reports are all they need (are they interacting with those emails a lot but not logging in?), right? Or their seasonal downtime kicks in. Or they’re on vacation.

Or you’re defining “inactive” as not using certain features you WANT them to use (or they bought) but in fact, they’re achieving their Desired Outcome thank you very much.

Context is everything, which is why…

Logins Don’t Matter

While you generally need to sign-in to an app to get value, that action alone is probably not the thing that delivers value to your customer.

Simply being “active” in the product doesn’t mean you’re being “successful” either.

In fact, a lot of logins and random in-app activity could be a sign that your customer can’t figure out what to do… but they sure would like to.

It’s a signal that something’s amiss… but a lot of companies might wrongly classify that customer as “active” and therefore “onboard” and “successful.”

“Active” – logins, random in-app activity, etc. – without context could be that the user wants to do something but can’t figure it out, so “active” in that case is actually a churn threat. Crazy.

A Better Definition of “Active”

When it comes to “activity” in your app, you need to know what activity patterns equate to value delivered.

No, that doesn’t have to be realtime analysis of complex clickstreams across user cohorts… but it might mean that if their Desired Outcome with your CRM is more sales, that they’re adding leads, calling or emailing those leads, scoring those leads, killing some, closing others, and marking some as “won.”

In fact, just a subset of all of those – marking some leads as “won” – would be enough to know their activity is generating the desired results.

On the other hand, you could say that – since they’re NOT using the 42 other features that your product has – or that the pricing tier they signed-up at includes – that they’re inactive and are a churn threat. Even though they’re marking leads as “won.”

The Context of Desired Outcome

If you tag a customer as “active” or “inactive” simply by looking at usage activity WITHOUT the context of Desired Outcome, you will miss things, waste time and resources trying to “save” a customer that’s not a churn threat, ignore customers that are a threat, and otherwise inhibit your growth as a company.

But if you knew what they were trying to achieve, and knew that they were in fact achieving that or at least taking the actions necessary in your product to get them to that point (there is often a Success Gap between functional use of your product and their Desired Outcome… a topic for another day), you would know that they are as “active” as necessary and are achieving success with your product.

If value is being delivered – if their Desired Outcome is being achieved – then Activity is where needs to be, at least at this point in the customer lifecycle.

Of course, you need to show them what their Desired Outcome should be, which would require activity and adoption to increase, which is why you need to develop a customer Nurture Program… but that’s a topic for a webinar I did recently with KISSmetrics.

Accurate definitions of customers and users

A user is someone that uses your SaaS product, right? Or is it someone that signed-up? Or someone that’s active? Or someone that logged-in a few times? Hmm.

Okay, so maybe defining a user is hard, but defining a customer is easy, right?

A customer is someone that pays you for your product or service. Even if they’re still within the legal timeframe for a refund? Or a contractual “cooling off” period? Or if they’re within the 90-day “stick period” (if they make it past 90-days they’ll stick around for a long time)? Or…

Wow, so even defining a customer isn’t as straightforward as it might have seemed.

And it gets even messier if you’re in a market with a more transient customer base (i.e. the level of real unavoidable churn is high), if you offer a completely free or freemium product, if you just launched with a lot of early adopter interest (i.e. the “Product Hunt effect”), etc.

To get honest about what’s going on in your company, you need to modify the customer (or user) definition, which is the main input into how you calculate the core metrics of your SaaS business.

Let’s explore this a bit…

Standard User Definition

You could totally just use the basic definition of customers and users for your calculations. If your board or investors want to see roll-up numbers, by all means use roll-up numbers (most good boards and investors will want to get more granular, however).

But, just like all high-level roll-up metrics, the real inner-workings of your business can be hidden (obfuscated – often unintentionally… sometimes not) and the actionability of those metrics will be limited.

So I’m not trying to talk you into anything here, but if understanding what’s really going on in your business – and then being able to do something about it – are useful to you, this might be something to consider. Cool.

Ultimately, when it comes to defining “users” you probably want to start only with those that are actually “engaged” with your product or service (whatever “engaged” means… hopefully it’s well-defined in your world).

This means getting away from low-value metrics like “signups” or “installs” or “logins” or even general “activity” and into specific metrics like “contextual activity” or activity that indicates whether the user is doing something from which they will derive value.

I’ll be honest… this will likely reduce the number of “users” you have – which will cause a hit to the ego – but it will give you a better, more realistic view of what’s really going on in your business.

And of course, the same thing goes for customers…

Not All Customers Can Churn (Right Now)

In the Customer Success world we often talk about calculating churn for a given period of time only against customers that could churn, i.e. those with an expired contract, who are up for renewal, with an out clause, etc.

Those that are otherwise bound by a contract couldn’t churn this month, so if we figure them into our churn calculation, we might look like we’re doing better than we actually are.

This many customers are in the “unable to churn” cohort: 13
Started with this many Churnable Customers: 87
This many Customers Churned: 10
Left with this many Actual Customers: 77

Customer Churn Rate: 11%
Customer Retention Rate: 89%

While this example might not look like a big deal – just a 1% difference – it’s actually a 10% increase in churn rate if we look at the customers that can churn. Rest assured, that small percentage will quickly compound into something significant.

Okay, so there are customers that aren’t eligible for churn, that makes sense, but to get an even more realistic metric, we need to acknowledge that there customers that we really shouldn’t consider customers… yet.

Not All Customers are Customers (Yet)

In the same vein as only considering customers eligible to churn in your churn calculations, you should only count customers that are actually customers in all of your other SaaS metric calculations.

Many SaaS companies will have a cohort of customers that – immediately after the sale or right after their conversion from free trial to paid customer – really shouldn’t be considered a customer, yet.

Maybe it’s a cohort of customers that came from being featured on Product Hunt, or from being included in a bundle with other SaaS products, or by running a discount campaign (the way I do discounts doesn’t cause this problem, but I digress) where we aren’t sure if they’ll stick around.

Or – like I said at the top – maybe it’s a cohort that’s still within the legal timeframe for a refund or they haven’t reached the “stick point” for your product (more on this in a second) – so we don’t want to figure them into long-term revenue projections just yet.

We also don’t want to figure them into “real” churn numbers yet because for this “too-early” cohort, their churn rate may be higher. Also, their churn REASONS will be different from more tenured customers (were oversold, onboarding didn’t happen, they exercised an out clause, etc.). Of course, you’re going to work to reduce the churn rate in this cohort just as you’re doing for the rest of the customers, but you’re just not figuring it into the overall churn numbers.

The Stick Point, BTW, is that point in time early in the customer lifecycle where – if a customer makes it that long – they’ll likely stay the entire estimated or typical lifetime.

For instance, in low-touch, self-service, quick configuration products, I’ll suggest waiting 1-2 billing cycles (60-90 days) post-conversion before I say they’re a real customer. This is doubly important if you do anything, err… shady… like forced continuity or if you require a credit card to start your free trial; after 2-3 billing cycles it’s less likely they just forgot to cancel.
Again, I’m no mathlete, but it’s actually not that hard to come up with some pretty significant results:

The Standard Churn Calculation (Super-Simplified)

Started with this many Customers: 100
This many Customers Churned: 10
Left with this many Customers: 90

Customer Churn Rate: 10%
Customer Retention Rate: 90%

Including “Churnable” & Excluding “Too-Early” Customers

Started this time period with this many Customers: 100
This many customers are in the “unable to churn” cohort: 13
Started with this many Churnable Customers: 87
This many customers are in the “too early to be considered” cohort: 17
Started with this many Actual Customers: 70
This many Customers Churned: 10
Left with this many Actual Customers: 60

Customer Churn Rate: 14.3%
Customer Retention Rate: 85.7%

As you can see, by excluding customers that are unable to churn and those that are in the “too-early” cohort, we have a real churn rate of 14.3%… or nearly 50% greater than what our “conventional” churn rate is. That’s significant.

And you’ll see similar differences in other key SaaS metrics – like Customer Acquisition Cost (CAC) and Monthly or Annual Run Rate – when you start calculating based on more meaningful definitions of users and customers.

Of course you can use whatever metric you want externally to show how awesome you’re doing, but internally – if you want to see how things are REALLY going – you’ll want to be honest in how you measure things by starting with accurate definitions of customers and users.